Journalism Leadership and the Peter Principle: A Guest Post From Eric Starkman

Reprinted by permission from Eric Starkman. Eric is president of Starkman & Associates, a full-service public and investor relations firm based in New York.

He previously headed the corporate communications practices of two major firms and earlier spent more than 15 years as a business reporter and editor at influential newspapers in the U.S. and Canada, including American Banker, The Detroit News, The Toronto Star, and The (Montreal) Gazette.

Much has been written about the changing role and significance of mainstream media and the myriad factors that continue to erode its once-vaunted credibility. Chief among them is, of course, that the field is rife with unethical individuals who fabricate and plagiarize, a trend I wrote about last May whenNew York Times columnist Maureen Dowd was caught using prose previously published by a blogger (my take here). Since then, at least two other high-profile cases of journalism plagiarism have emerged, as outlined in this column by New York Times columnist Clark Hoyt.

Another major factor for mainstream journalism’s decline is the profession is plagued with failed leaders who, despite their less-than-stellar track records, continue to hold their senior positions. Mainstream journalism is in desperate need of radical visionaries, yet the industry continues to be led by people who are part of the problem rather than a source for the solution. Is there any other business where failure and myopia is so frequently and handsomely rewarded? If ever there was a single industry that illustrates the concept behind The Peter Principle, today’s mainstream media is it.

Marcus Brauchli, the former managing editor of the Wall Street Journal, is a prime example. Under the leadership of Brauchli and other senior editorial leaders, the Journal went into a near-irreversible economic spiral. A very senior Dow Jones executive confessed to me that the company quite possibly would have gone bankrupt had Rupert Murdoch’s News Corp. not come to the rescue. As part of the deal, Brauchli retained a degree of “veto” power over anything Murdoch might want to do with the paper, ostensibly to protect the Journal’s editorial integrity and standards. Once the deal closed, however, Brauchli reportedly received a whopping $6.4 million to go away instead. In this market, Brauchli’s payout is sufficient to finance the hiring of at least 10 reasonably experienced reporters.

Brauchli has since been named Executive Editor of The Washington Post, another newspaper that has suffered a significant erosion of prestige, talent, and national influence. The paper is badly in need of an innovative editorial leader to regain the previous glory it once had under the editorial leadership ofBenjamin Bradlee in the late sixties through early nineties. Brauchli is no Bradlee; if he is doing anything of note to save that newspaper, it isn’t readily apparent. Indeed, the newspaper’s one known attempt at, ahem, “innovation” — soliciting lobbyists to pay a hefty fee for exclusive meetings with editors and reporters — was the biggest journalism ethics debacle in recent memory. Brauchli claims he wasn’t told of the pay-for-access program, a possible indication of how he’s regarded by the business side of the newspaper.

Stephen J. Adler, who also held senior editorial positions at the Journal before being named editor ofBusinessWeek in 2005, is another example of how journalism rewards failure. BusinessWeek, a once grossly underrated magazine that long eschewed gourmet sizzle for solid meat-and-potatoes reporting and analysis, badly stumbled under Adler’s four-year leadership. Under his tenure, the weekly magazine essentially became the Reader’s Digest of American finance, replete with oversized typeface, condensed stories, and bulky photos and graphics that badly reduced the magazine’s news hole. The magazine was on the brink of failure when Bloomberg picked it up for next-to-nothing last fall. Adler resigned shortly after the deal was announced, subsequently moving on to Thomson Reuters where he was named senior vice president and editorial director of its Professional division. Since the sale, BusinessWeek is fast returning to its previously high editorial standards, which is to Bloomberg’s great credit.

The disturbing state of journalism leadership was, ironically, further demonstrated recently at a meeting held by a trade group called the Committee of Concerned Journalists who are “worried about the future of the profession” (I guess non-members belong to the Association of Reporters Who Don’t Give a Damn). As reported by Fox Business News Senior Correspondent Charles Gasparino (Full disclosure: Gasparino is a longtime friend of mine), the high-minded committee last week held a seminar to breast-beat themselves for their failure to warn the public that the U.S financial system was on the brink of collapse.

Hank Paulson, the former Treasury Secretary and CEO of Goldman Sachs in the period leading up to the economic collapse, gave the keynote address. If anyone there could have shed valuable light on the subject, clearly he was the one. However, according to Gasparino, the “concerned” journalistic luminaries on the panel, including Fortune editor Andrew Serwer and New Yorker media writer Ken Auletta, never availed themselves of the opportunity to ask Paulson the tough questions about his own failure to anticipate or prevent the economic collapse.

Hmmm…just a wild guess here, but reporters who don’t act like reporters could have something to do with the professional pickle they collectively find themselves in.

Personally, I don’t buy into this notion that reporters should have been able to predict the financial meltdown. It takes unabashed arrogance for journalists to believe that they are so well-steeped in economics and high finance that they can possibly forewarn the nation of a pending financial collapse. They are on the sidelines, not in the game itself. Most business journalists tend to mime conventional wisdom of the day, which explains why the leaders of Enron, Worldcom, and Tyco were heralded in newspaper and magazine cover stories before those companies blew up. Journalists would serve their audiences best if they reported as many informed perspectives as possible, rather than spew out their too often misinformed and biased opinions about the companies and subjects they supposedly objectively cover. As for the prescience of mainstream journalism about Goldman Sachs and Paulson, check out this fawning profile that Fortune published in 2004.

According to a study by the Pew Project for Excellence in Journalism, less than 30 percent of Americans believe what they read in the mainstream media. That’s a fairly sobering statistic, and one that the Committee of Concerned Journalists should be focused on rectifying above anything else. Sadly, absent a real change in the vision, mindset and competencies of the bold-faced names that occupy the upper echelons of the business, mainstream journalism will likely only continue to go downhill.

“Re: Recent guest commenting on the media…not to defend the media, however, his comments [below] would fit the auditing sector by changing several verbs.

“the myriad factors that continue to erode its once-vaunted credibility. Chief among them is, of course, that the field is rife with unethical individuals who fabricate and plagiarize, a trend I wrote about last May.”..

Tnank you for sharing this illuminating post from your guest contributor, Eric Starkman. It is of great interest generally, on the subject of journalism, and of great interest particularly, to all of us in the blogosphere, as we watch (and to varying degrees, participate in) the continued evolution of journalism, including “citizen journalism,” print and online journalism, blogging, tweeting, et al.

With respect to the field of auditing, specifically, similar to commenter #1 above, I can also see some interesting parallels between some of the things being said about journalism these days, and things being said about auditors. For example, substitute “auditing” for “jouralism” and “auditors” for “journalists” in the blurb below, excerpted from the website of the Committee of Concerned Journalists (CCJ) (specifically, the “CCJ History” page: http://www.concernedjournalists.org/about_ccj/history ) an organization I learned of in your guest post above.

“On a rainy Saturday in June 1997, twenty-five journalists gathered at the Harvard Faculty Club. Around the long table sat editors of several of the nation’s top newspapers, as well as some of the most influential names in television and radio, several of the top journalism educators, and some of the country’s most prominent authors. They were there because they thought something was seriously wrong with their profession. They barely recognized what they considered journalism in much of the work of their colleagues. Instead of serving a larger public interest, they feared, their profession was damaging it.The public, in turn, increasingly distrusted journalists, even hated them. And it would only get worse.”

I think there have always been a range of views on the practical aspects of expecting auditors to fulfill a ‘public interest’ vs. fulfill a professional duty in terms of the work they provide, how they are compensated, by whom they are compensated, etc. And these issues are now seeping into the journalism field as well, in terms of decisions on erecting pay-per-view type firewalls by news organizations ranging from the NYT and FT to independent or quasi-independent bloggers, and what the role of ‘news organizations’ and ‘journalists’ are.

Thanks again for including this fascinating guest post in your blog, it is very interesting to read guest contributors among your always lively posts.

Thank you for sharing this most thought provoking post. Your point above: “Journalists would serve their audiences best if they reported as many informed perspectives as possible, rather than spew out their too often misinformed and biased opinions about the companies and subjects they supposedly objectively cover.” speaks to scope creep journalists have taken upon themselves. I wholeheartedly agree with your viewpoint, and believe that the public interest would be best served by journalists improving the transparency of current affairs.

As a auditor and a fraud examiner, I’ve been frustrated by difficulty auditors have in remaining independent from management. Unlike journalists who are not paid by management, auditors must in some way bend to the will of management in order to get next year’s audit. This lack of independence existed before SarbOx, and nothing in the new regulations changed that essential shortcoming in the auditing business model.

The source of the ethical problems evidenced by Lehman, Enron, etc., stem from the difficulty of assigning risks and rewards among various stakeholders: shareholders, employees, customers, management. With management controlling the board, the rewards generally are given to management, with the risks absorbed by shareholders, customers and employees.

Our best bet in restoring public trust would be to change the composition of corporate boards. In a perfect world, boards would be independent of management. That way, when auditors are hired directly by the audit committee, independence is built-in. No more shared roles of CEO and Chairman. Board directors would not be selected based on connections, but rather by search firms. I’d add another improvement to the SarbOx rules on board composition by suggesting that more than one financial expert be empaneled on the board.

Well, we can’t solve the problems of the world in just one day, but it is my sincere hope that significant changes are made to restore public trust, and conversations that you initiate on the web are a great way to start!

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Francine McKenna (@retheauditors) is the Transparency Reporter at MarketWatch.com, a Dow Jones publication, where her work is also featured frequently in the Wall Street Journal. McKenna had more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad before becoming a journalist. Look for her prior columns, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com